COVID-19's Impact on the F&B Industry & Outlook
Let's face it that the CoronaVirus has changed our lives like nothing before in living memory. And, this is just the beginning.
The CORONAVIRUS' effect that we see and feel now is just the tip of the iceberg. At the time of writing this blog, the number of affected cases has reached the 1,200,000 mark.
The stock markets worldwide started crashing and an impending global recession is certain. Unemployment will increase, economies will contract and consumer confidence will drop significantly. Even if the Coronavirus epidemic dies down in the next two months, the long term effect of the havoc that it has wreaked will probably be felt for years from now.
Industry Segments Hit Hardest by Coronavirus
The airlines industry was the first casualty. As governments went into lockdown mode, the number of flights had to be reduced. Most organizations and individuals imposed restrictions and it is becoming worse by the day. Many airlines can go bankrupt by May 2020 this year. The other segment that has been hit hard is the hospitality segment. Naturally, with the CORONAVIRUS raging, hotel bookings dropped significantly.
The F&B industry was expected to be impacted too. But the suddenness of the Coronavirus caught all restaurateurs off guard. While the reports of the virus were hitting news headlines since January 2020, the impact on the F&B industry was minimal. And, then from March 13th, the industry stared into a deepening crisis,
Coronavirus impact on the F&B industry
At the time of writing, most eateries have already seen about 2 weeks of closure. Even before the mandatory lockdown in India, most restaurateurs had temporarily shut down voluntarily. From early March 2020, as the virus spread, most eateries saw a sharp reduction of footfalls. It was clear that the industry would be going through very, very difficult times.
The F&B industry depends on quick, almost daily, cash flow to sustain operations which includes ingredients, salaries, rent, various bills. This cash flow has been really hard hit due to COVID-19. It is, also, unlikely, that the industry will be allowed to start immediately after the lockdown is lifted. Even after restaurateurs begin operations, it will probably be weeks before consumers gain the confidence to start eating out again.
RECESSION DUE TO CORONAVIRUS & impact on the F&B industry
Let's face it the global economy is going to be in shambles and its effect will be felt in India. While most global organizations have announced that there will be no lay-offs for at least another 90 days, the economic scenario would be uncertain for quite a while. This would impact consumerism and, therefore, the F&B industry. It is likely that demand will continue to be weak for quite some time to come.
silver lining for F&B industry
There could be after all good news for the Indian economy and, therefore, the Indian F&B industry. An article in the Economic Times, predicts that India's economic recovery would be faster and smoother compared to advanced economies. According to KMPG's one of three scenarios is that India's GDP growth could be around 5.3-5.7% in case of a quick retraction by mid-May 2020. This would mean that India still continues to be one of the fastest growing major economies in the world.
Also, due to the global economic slowdown, outsourcing to India could possibly see a spurt. This would mean that cities which has a large section of workers in Offshore Development Centers, BPOs, KPOs, and offshore R&D companies will see a quick recovery and possible growth in the near to mid-term.
recommendations for the F&B industry
The next few months are going to be difficult for the Indian and the global F&B industry. With weak demands, low consumptions and the full force of the pandemic to be yet ascertained, the F&B industry faces many challenges. It is critical at this point to draw out a clear survival strategy. It is important to relook at expenses and the services required. Go ahead and reduce expenses while trying to maintain or enhance the existing level of services. Go ahead and rebuild your marketing strategy so that you can increase your footfalls, get quality customers while reducing costs.
It's going to be difficult few months but I am sure the industry has tremendous resilience and will bounce back. Good luck, restaurateurs!